MCX Cotton under short covering; Support seen at 16310
Commodity Online | August 07 2020
UPDATED 12:00:14 IST

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MCX Cotton under fresh buying; Support seen at 17950

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Technically Cotton market is under short covering as market has witnessed drop in open interest by 2.38% to settled at 2255 while prices up 10 rupees.

Now MCX Cotton is getting support at 16310 and below same could see a test of 16190 levels, and resistance is now likely to be seen at 16550, a move above could see prices testing 16670.

Cotton yesterday settled up by 0.06% at 16430 amid increased demand from the textile industries in the domestic market respectively, as some of states have started to ease lockdown.

Moreover, easing farm activities in rural regions led to increase buying of cotton especially in the state of Gujarat; with easing tensions of lower supplies and arrival shortage.

At the global front, the demand for cotton had been reported to have increased especially China due to easing lockdown, though China has not begun full-fledged buying of US agricultural products based on the Phase 1 US-China trade deal.

Amid Covid-19 disruptions, India will witness record cotton carryover stock in the past five years at 55.50 lakh bales (each of 170 kg) for the crop year 2019-20 (October-September).

Trade body Cotton Association of India (CAI) has estimated the carryover stock of 55.50 lakh bales (lb) at the end of the season on September 30, 2020, which indicates the next season will start with a five-year high carryover stock. Per the CAI data, in 2014-15 the carryover stocks of the fibre were reported at a high of 67.23 lb.

A higher carryover stock will lead to increased stock position, thereby influencing the prices in the new season, which begins from October 1. The kharif sowing for cotton is already 22 per cent higher so far at 118 lakh hectares as against 96.35 lakh hectares last year.

Trading Ideas:
--Cotton trading range for the day is 16190-16670.
--Cotton gained amid increased demand from the textile industries in the domestic market respectively, as some of states have started to ease lockdown.
--Moreover, easing farm activities in rural regions led to increase buying of cotton especially in the state of Gujarat
--Amid Covid-19 disruptions, India will witness record cotton carryover stock in the past five years at 55.50 lakh bales for the crop year 2019-20
--In spot market, Cotton remains unchanged at by 0 Rupees to end at 16090 Rupees.

Courtesy: Kedia Commodities

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